84% of venture investments go to technology firms

The Republic put the highest proportion of venture capital into technology investment in Europe, with a leap in total private equity investment from #62 million (£48.8 million) in 1999 to #183 million in 2000.

The Republic led Europe with 84 per cent of venture investments going to technology companies in 2000, according to PricewaterhouseCoopers' annual report on European technology investment, Money for Growth. The European average was 30 per cent, while in Britain the figure was 20 per cent.

"Ireland has definitely attached a flag to the mast of technology," said Mr Joe Tynan, PwC survey director in the Republic. "The rate of growth in Ireland is, I think, very surprising."

The number of deals rose from 88 in 1999 to 158 in 2000, with companies receiving investments rising from 86 in 1999 to 107 in 2000. Of the total, #104 million were classified as e-commerce investments, a substantial increase of #34 million in 1999. Some 59 per cent of funding went to early stage or seed investments - higher than Europe or the US - and 38 per cent to expansion.

Mr Tynan believes Irish investment talent leans towards technology "because it's possible for technology companies to compete on a global stage". Technology companies generally trade across borders, and also have a range of "exit mechanisms" - buyouts or mergers - that allow them to grow beyond the confines of the State, increasing the potential for personal wealth and payoff to investors. "That didn't exist in many old industries," he said.

In amounts invested, Britain led overall with nearly #3 billion, 26 per cent of the total European figure of #11.5 billion. France was second at #2.4 billion, doubling its 1999 total of #1 billion, while Germany was third at #2.3 billion, up 68 per cent on 1999's #1.4 billion. Italy was fourth at #0.8 billion, up from #0.3 billion. The Republic places ninth, behind Sweden, Spain, and Belgium, but ahead of Finland, Denmark and Norway. However, Scandinavian companies, particularly in the mobile/wireless sector, often receive investment from large companies such as Nokia and Ericsson, which would not appear in the venture totals, said Mr Tynan.

Investment activity levels in Europe are catching up on Britain, which declined from 32 per cent of the total in 1999, and 44 per cent in 1998. The number of deals in Germany and France - 1,492 and 1,508 respectively - surpassed Britain, at 1,012.

However, although their markets are about the same size, Europe is still dwarfed by venture investment levels in the United States. Of a total of $87.5 billion (#101.54 billion) in VC investments in 2000 - up from $46.3 billion in 1999 - technology-related investments equalled $84.8 billion. The bulk of US funding went into communications/networking ($22.5 billion) and software ($17.8 billion).

The average amount given to European companies is #1.5 million, with the Republic comparing favourably at #1.1 million. But US deals average #18.5 million. Mr Tynan said this was worrying for Irish companies, which tended to compete in the US. In the Republic, #100 million went to software companies, #26 million to semiconductor firms, and #48 million to wireless companies. In 1999 Irish VCs raised #316 million but only invested #100 million, and in 2000 raised #198 million but spent #222 million. If the Republic follows US trends, fundraising will be down in 2001, with US funds reaching only 12 per cent of last year's total. Mr Tynan said Irish companies looking for early stage funding were having a hard time and taking three months rather than six to eight weeks last year to raise investments.